New Obama stimulus: hiring subsidies

posted at 1:51 pm on November 28, 2012 by Ed Morrissey

Yesterday, I noted that the White House seemed curiously unwilling to talk about the expiration of the payroll-tax holiday, the bipartisan stimulus plan enacted in 2011 which ended up not providing any economic stimulus. At almost the same time, the Obama administration rolled out its new idea for a job-creation stimulus, which borrows from Jimmy Carter’s economic plans. Oddly, they’re willing to talk about this:

President Obama made a fresh call Tuesday for another round of economic stimulus, proposing to spend more than $25 billion to offer tax breaks to companies to hire workers or pay them higher salaries.

The measure is Obama’s first proposal aimed at addressing the still-weak economy since his reelection and an acknowledgment that though it is no longer a political threat, the nation’s unemployment rate of 7.9 percent remains a significant problem.

The tax breaks would target small businesses and refund 10 percent of the cost of new payroll — in the form of new hiring or new wages — up to a total of $500,000 next year.

The Tax Policy Center — which the Washington Post calls “non-partisan,” a description that would amuse the Wall Street Journal and others — says that this policy worked during the Carter administration, the last time it was tried. Don’t you recall that huge hiring tsunami that happened during Carter’s term? Well, the TPC doesn’t either, but says that’s because Carter didn’t advertise it enough:

The last time the country had a similar proposal to the tax subsidy was during the Carter administration, according to the Tax Policy Center. Research by the Labor Department found that few firms knew about the tax policy, but those that did increased employment notably.

“An incremental jobs credit could be a cost-effective way of raising employment in the short run,” the nonpartisan center said in a report this year. The effectiveness of any jobs subsidy depends. . . on how employers perceive its potential benefits when making hiring decisions.”

Really? I’d guess that most companies didn’t do their own taxes around a kitchen table and a freebie calculator in the late 1970s, or even on TurboTax these days. They hire tax attorneys and accountants to get them every possible tax break. The TPC assumes that the chicken of more expansive hiring came from the egg of the tax credit, but it’s at least just as possible that the companies that were hiring anyway aggressively looked for ways to take advantage of tax credits to cover that cost. In other words, knowledge or ignorance of the tax credit was irrelevant to companies that weren’t going to hire anyway.

Why do companies expand their workforce? To meet growing demand that expands to the point where it costs more in opportunity to pass up the demand than it does to add labor to the bottom line in order to meet it. Tax credits only impact on the margins of those decisions. What has a much larger impact are the costs associated with added labor — especially costs associated with benefits and other regulatory efforts. Thanks to ObamaCare, the costs associated with hiring have escalated significantly, and thanks to Obamanomics, demand isn’t growing fast enough to warrant expansion. Furthermore, the tax credit will only extend one year, while the costs of the added labor will go on for many years, which also factors into the decision to expand.

The only companies that will take advantage of this latest short-term gimmick are those who will be expanding anyway. It’s the latest in the Cash for Clunkers mentality of this administration. Instead of understanding how and why businesses actually make these decisions and calculating policy over the long term to boost job creation, we’re getting another round of jollying-along cluelessness.

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Forget about that dead parrot of a question – should we join the eurozone? The eurozone has officially joined us in a newly emerging international organisation: we are all now members of the Permanent No-growth Club. And the United States has just re-elected a president who seems determined to sign up too. No government in what used to be called “the free world” seems prepared to take the steps that can stop this inexorable decline. They are all busily telling their electorates that austerity is for other people (France), or that the piddling attempts they have made at it will solve the problem (Britain), or that taxing “the rich” will make it unnecessary for government to cut back its own spending (America).

In the name of the general welfare, to protect the people’s security, to achieve full equality and total stability, it is decreed for the duration of the national emergency that:

Point One. All workers, wage earners and employees of any kind whatsoever shall henceforth be attached to their jobs and shall not leave nor be dismissed nor change employment, under penalty of a term in jail. The penalty shall be determined by the Unification Board, such Board to be appointed by the Bureau of Economic Planning and National Resources. All persons reaching the age of twenty-one shall report to the Unification Board, which shall assign them to where, in its opinion, their services will best serve the interests of the nation.

Point Two. All industrial, commercial, manufacturing and business establishments of any nature whatsoever shall henceforth remain in operation, and the owners of such establishments shall not quit nor leave nor retire, nor close, sell or transfer their business, under penalty of the nationalization of their establishment and of any and all of their property.

Point Three. All patents and copyrights, pertaining to any devices, inventions, formulas, processes and works of any nature whatsoever, shall be turned over to the nation as a patriotic emergency gift by means of Gift Certificates to be signed voluntarily by the owners of all such patents and copyrights. The Unification Board shall then license the use of such patents and copyrights to all applicants, equally and without discrimination, for the purpose of eliminating monopolistic practices, discarding obsolete products and making the best available to the whole nation. No trademarks, brand names or copyrighted titles shall be used. Every formerly patented product shall be known by a new name and sold by all manufacturers under the same name, such name to be selected by the Unification Board. All private trademarks and brand names are hereby abolished.

Point Four. No new devices, inventions, products, or goods of any nature whatsoever, not now on the market, shall be produced, invented, manufactured or sold after the date of this directive. The Office of Patents and Copyrights is hereby suspended.

Point Five. Every establishment, concern, corporation or person engaged in production of any nature whatsoever shall henceforth produce the same amount of goods per year as it, they or he produced during the Basic Year, no more and no less. The year to be known as the Basic or Yardstick Year is to be the year ending on the date of this directive. Over or under production shall be fined, such fines to be determined by the Unification Board.

Point Six. Every person of any age, sex, class or income, shall henceforth spend the same amount of money on the purchase of goods per year as he or she spent during the Basic Year, no more and no less. Over or under purchasing shall be fined, such fines to be determined by the Unification Board.

Point Seven. All wages, prices, salaries, dividends, profits, interest rates and forms of income of any nature whatsoever, shall be frozen at their present figures, as of the date of this directive.

Point Eight. All cases arising from and rules not specifically provided for in this directive, shall be settled and determined by the Unification Board, whose decisions will be final.

Government puts on tons of regulations, plunks down ‘entitlement’ costs of SSA and Obamacare, taxes the hell out of ‘the rich’ which means anyone with a small business that has a few people in it… and then, because it costs way too much to hire someone new and its killed sales, it must SUBSIDIZE hiring. Not going to do one thing on helping sales because the cost of that new hire is still getting put into the system… pure and utter genius!

Kill the goose that lays the golden eggs, complain about the gold and then try to shock it back to life because you’ve run out of gold!

Just wait until they want to tax the rich even more!

Soon they will have to subsidize all sales just to keep things moving. Because, you know, government is full of economic geniuses.

At the risk of dating myself, I can tell you I remember this failure of a policy & the fact is, the writer is correct. The Co’s that took advantage of it, were already hiring. The credit was so minimal compared to the carrying costs of an employee, it meant nothing. Either the co. was already hiring or they were not. This childishly naive failure of a policy, was and is of no consequence. Proving once again, either Benedict Obama’s trying to hurt American business or he’s dumb as a box of rocks, when it comes to business! Personally, I think it’s both, but I wouldn’t believe anything coming from the Butcher of Benghazi!
The Traitor-in-chief will implement more idiotic policies before this nightmare is over. The question is, will the American Public accept another stolen election in 2016 and continued Socialist Demolition of America? From America’s reaction to the Freedom Fighters in Egypt, my guess is the American Public, with certain few exceptions, have lost their testicular fortitude and Surrendered like the eSTABrepubs/rinos! We’ll see if I’m proven Right Again!

Not just No, but Holy Crap No, it wasn’t 35 years of government involvement in education, it was 100 years of Marxist infiltration of Academia.

SWalker on November 28, 2012 at 2:29 PM

Absolutely. You have to give them credit for patience and single-minded constancy. Plus, their academic crippling of the populace has rendered it more easily controlled by the entertainment (including the LSM) industry, which they have also absorbed.

“In the Alinsky model, “organizing” is a euphemism for “revolution” — a wholesale revolution whose ultimate objective is the systematic acquisition of power by a purportedly oppressed segment of the population, and the radical transformation of America’s social and economic structure. The goal is to foment enough public discontent, moral confusion, and outright chaos to spark the social upheaval that Marx, Engels, and Lenin predicted — a revolution whose foot soldiers view the status quo as fatally flawed and wholly unworthy of salvation.Thus, the theory goes, the people will settle for nothing less than that status quo’s complete collapse — to be followed by the erection of an entirely new system upon its ruins. Toward that end, they will be apt to follow the lead of charismatic radical organizers who project an aura of confidence and vision, and who profess to clearly understand what types of societal “changes” are needed.”

“As Alinsky put it: “A reformation means that the masses of our people have reached the point of disillusionment with past ways and values. They don’t know what will work but they do know that the prevailing system is self-defeating, frustrating, and hopeless. They won’t act for change but won’t strongly oppose those who do. The time is then ripe for revolution.”

Hey, lets elect a devout alinskiite to the White House for two terms and then act surprised that he is fundamentally destroying America!

Good Lord !
Arn’t these the same folks that bashed the credit card companies for doing the same thing.
No interest this year, but 18% next.
This is the same thing. Save abit on a new hire this year, but pay full price next year.

Why do companies expand their workforce? To meet growing demand that expands to the point where it costs more in opportunity to pass up the demand than it does to add labor to the bottom line in order to meet it.

Thank you, Ed. This is one of the fundamental principles of how the free market works, and something of which that 0bama has absolutely zero grasp.

SWalker tried to correct the record but he missed by 50 years. The progressive long march through are education system started with Horace Mann and the Boston Day School. The march culminated with John Dewey and Columbia Teachers College. Dewey’s great plan was not to teach reading, writing and arithmetic but to indoctrinate kids into the correct way of thinking. Since every school of education is patterned after CTC we are reaping the results today.

The sad thing is how many people, including conservatives, continue to send their children to these indoctrination centers and then have no clue as to why their children have been brain washed into progressive ideas.

Our Dear Leader, King Barack Hussein Louie Obama, will be a great Emperor for Life as he is a very highly educated man. He went to University where he was well schooled in bigotry and allegations, of course, to begin with, and then the different branches of arithmetic: ambition, distraction, falsification and derision. Trust him. He knows what he is doing. Just be patient. His economic plan will work perfectly. I have worked it all out mathematically. Let me see now, four million times five million is twelve million, and four billion times six billion is thirteen billion, and four trillion times seven trillion is … … oh my! We shall never get to economic recovery and prosperity at that rate! However, the multiplication table doesn’t really apply. Let’s try geography. Iraq borders Pakistan, the center of the Universe was Iraq but now it’s Afghanistan, America has 57 states, Minnesota is in the tropics because of Global Warming. No, that’s all wrong, but geography doesn’t really apply either, I’m certain! Let’s try religion. The Mossad was behind 9/11, Palestinians are victims, Saudi Arabia is our good friend and Islam is a great religion of peace. No, that’s all wrong too! Maybe if our Dear Leader just starts over and this time he reads the directions then perhaps directly he will be able to direct himself in the right direction.

Honestly, do you really believe Obutthead is that stupid? A high school Econ 1 student with a C average wouldn’t suggest doing something that stupid. Obutthead just wants to take America down and keep the illiterate in the dark until Armageddon. This is not stupidity–it is pure EVIL And the stupid people of a once great nation are going along with it all.

To borrow a phrase, “For the first time in my life I am ashamed to be an American.”

It all makes, er, sense. 2 + 2 != 5.
Great recall for those that mentioned the ease of ‘cash for clunkers’.
So many good vehicles rendered useless by fiat, for “HEY BUY A VOLT, IT’LL JOLT”.
If only to suspend the laws of physics, and of course, miles travelled.

Is there a Galt–?, I’m bound for that while I work.

Sometimes it is worth preaching to the choir (they already know) and
sometimes just to say it is worth the struggle.

As a former human resource professional who was active during Jimbo’s only term, I remember us looking at this particular incentive. We decided that we didn’t give a flying sexual innuendo at a rolling donut about this particular opportunity. If we needed to hire someone, we’d hire someone. If we didn’t need to hire someone, we would not hire someone. Pretty simple, huh?

This kind of ‘incentive’ sounds good when you are standing behind that big ol’ presidential podium with that big ol’ presidential seal talking to a bunch of libtard ignorant reporters. In fact, it ain’t worth a flying sexual innuendo at a rolling donut.